The Truth about Electricity Price Hikes/Wind Power Kansas

An organization outside of Kansas is attempting to contort information about Kansas energy policy. It is important for you that we provide accurate information about some of the claims in their emails and in an associated editorial piece.

First, if you would like to read an actual Forbes article (not an editorial) about wind energy, we have provided a link below to an article featured this week in Forbes about wind power and a Texas case study – which illustrates the successes and benefits of Texas wind energy and energy policy. Please note, Texas’ Renewable Portfolio Standard (RPS) law was signed into law under the George Bush, who also touted the benefits of wind power while President, based on the positive experience of how wind power economically benefitted his home state.
Texas Gets Wind Right: http://www.forbes.com/sites/peterdetwiler/2014/02/21/how-to-more-effectively-utilize-wind-energy/

Regarding the Texas and Oklahoma examples cited in the outside group’s email – they suspiciously choose not to mention the following:

1. Texas has an RPS which has been on the books since 1999. Their standard set a benchmark of 5,880 MW by 2015 with a goal of 10,000 MW by 2025. Texas has exceeded its own expectations in wind energy production with 12,214 MW of installed wind from 116 wind projects and ranks number one in total megawatts of wind installed.
2. Oklahoma has a voluntary RPS of 15% by 2015 which was enacted in 2010. Oklahoma has 29 wind projects online producing more than 3,134MW of wind.
3. Electric deregulation was mentioned as a cost controller in Texas. This is a very complex subject, but it is important to know that only the most populated cities in Texas are subject to electric deregulation. The Texas Panhandle, which is in the Southwest Power Pool (SPP) region of FERC districts, of which Kansas is also a member, is NOT deregulated. This is an important distinction. In terms of population and topography, Kansas looks more like the Texas Panhandle than any of Texas’ metropolitan areas.
4. Texas and Oklahoma are the centers of the new oil and gas play from fracking in the south central United States. Shale gas from fracking has temporarily helped keep their electric rates stable, although recent drastic price increases in shale gas have utilities worried about the long-term prices.

Regarding Kansas, certainly there is no disputing electric rates have been on the rise particularly since the 2005 timeframe. However, rate increases in Kansas cannot be attributed to one policy, but rather you have to look at the entire range of policies and energy industry activity over the last ten years to understand how and why electric prices are increasing.

1. The utility industry is cyclical – there are times of significant investment followed by a period of time where the utility can ride those investments for years before re-entering another build/investment mode. The most recent build/investment mode began in Kansas roughly in the 2004/2005 timeframe when several announcements were made for new baseload generation plants. One baseload facility was constructed, others are pending. In subsequent years, announcements were made for new peaking facilities as well as new high-voltage electric transmission lines sorely needed in Kansas. By 2006, it was widely known that Kansas was constrained – we could not move power around the state nor could we cost-effectively move power inside or outside of our borders. The transmission constraints were impacting electric rates in Kansas as utilities were limited in their ability to move and acquire power for consumers. New investments in generation and transmission had to be made.

2. Kansas’ fuel mix utilizes more than 70% coal, which historically has seemed to keep electric rates stable. (We believe if you factor in the healthcare costs and climate change costs of burning coal, which have not been included on electric bills, then coal may not have been the preferred choice of fuel. See Harvard Medical School Study whose findings indicate additional unpaid for costs may be as high as $.26.89 per kWh. You can download pdf of study here) However, without significant generation coming from other resources, Kansas has been subject to greater impacts of fuel volatility. The cost of subbituminous coal (the primary fuel in Kansas) has increased every year from 2001-2011 for a total increase of 43%, according to the Energy Information Agency (EIA), and the cost to transport coal was increasing by 5% per year also according to the EIA’s latest data. These basic costs of coal have played a large part in rising rates of electricity.

3. Add to the fact that EPA clean-air regulations have been necessary to protect the health of our citizens, which have required new scrubbers and other technologies at several Kansas coal plants and there you’ll find another contributing factor for an increase in Kansas electrical rates. (Hundreds of millions of dollars in environmental retrofits at Jeffery Energy Center and $1.2 Billion at the LaCynge Power Plant.)

4. Kansas electricity prices may have risen since 2009, but according to the Kansas Corporation Commission, the RPS is not the culprit. In a March 2013 Retail Rate Impact Report, the KCC attributed wind power’s impact on rates at 0.16 cents/kwh. Yes, less than 2/10’s of a cent. (http://www.kcc.state.ks.us/pi/2013_retail_rate_impact_report.pdf) This is in addition to the KCC’s previous reports noting that the wholesale rate impact due to RPS compliance was between 0-1.7% – and that is with the Kansas utilities nearly meeting the 20% by 2020 benchmark. Furthermore, rates are kept in check by the 1% cost impact escape clause for utilities so the KCC can deny the RPS investment if it will increase rates by more than 1%. These regulations, contrary to what the outside group and their anti-wind power allied members of the legislature are saying, make it nearly impossible for wind power and the RPS to cause noticeable rate increases for electricity.

5. In KCP&L’s recent announcement about its investment in wind power and energy efficiency, the following quote was made: “We believe the total benefit for our customers over the next 20 years is that rates and costs will be about $1 billion lower than they would have been if we had not been investing in wind and energy efficiency. The benefits would come from about $400 million from energy efficiency and about $600 million in savings due to wind power that reduces the need to use other kinds of fossil fuel.” Katie McDonald, KCP&L Communication Director, January 7, 2014.
Below are some comments about wind power in Kansas:
“Kansans are also reaping the rate impact benefits of a RPS by getting inexpensive power. In the case of Infinity’s power purchase agreement with Sunflower, the price was so low that Sunflower determined that it would have a neutral or negative impact on their customer’s rates. Wind energy is produced for less than $0.03/kWh in today’s PPA environment, which is less than half of your retail rates,” Matt Riley, CEO Infinity Wind Power before House Energy & Environment 2.14.13

“Flat Ridge 2 wind power could lower SWEPCO customer bills in 2013 by roughly $.05 per monthly bill for customers using 1,000 kilowatt hours and $.11 per monthly bill in 2014.” – SWEPCO (Wind project is located in Kingman, Barber and Harper counties)

Alabama Power, a subsidiary of Southern Company, is “absolutely looking for more wind power” to import from Midwestern states. Noting that Alabama does not have good wind resource, “Wind energy is cost-effective for the utility’s customers and helps diversify its fuel mix.” – Michael Sznajderman of Alabama Power (Wind project is located south of Garden City)

The people of Kansas need to know the truth about energy policy in our state. Fossil fuel companies are desperate to protect their profits from the competition coming from Kansas wind power. We cannot allow misinformation from the fossil fuel-funded organizations to prevent the low-priced electricity from wind power, which also provides a huge new revenue stream to our farmers and ranchers, to be kept from development.

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